Question

Jose Ruiz manages a car dealer’s service department. His department is organized as a cost center. Costs for a recent quarter are shown below. List the costs that would appear on a responsibility accounting report for the service department.

Cost of parts	\(22,400	Shop supplies	\)1,200
Mechanic’s wages	14,300	Utilities (allocated)	800
Manager’s salary	8,000	Administrative cost (allocated)	2,200
Building depreciation (allocated)	4,500

Short answer

The responsibility report will include$37,500 as a controllable cost.

Step-by-step solution

Definition of Administrative Cost

The cost incurred for assisting the business operations but not directly related to the production of goods or services is known as administrative cost. It includes costs such as audit fees.

Costs that would appear on the responsibility report

Particulars	Amount $
Cost of parts	$22,400
Add: Mechanic’s wages	14,300
Shop supplies	800
Controllable Cost	$37,500